Full throttle

How Ross Perot Jr. runs a public company and still manages to lead a real estate empire

When Ross Perot Jr. piloted his helicopter around the globe in 1982, many thought it was simply a stunt by the brash young son of a noted high-tech industrialist.

But today, it seems, Perot may have been on a reconnaissance mission to find the tens of thousands of acres he would come to control and sites for the dozens of projects he would launch into motion.

With his giant Alliance Airport complex in north Fort Worth gliding into its second decade and the new $420 million American Airlines Arena open in Dallas, Perot, 42, has headed full speed into a vastly different sphere as chief executive officer of Perot Systems, the technology firm started by his father.

Perot's resume reflects a confluence of industries: land investment, construction, manufacturing, transportation, community master planning, arena development, NBA team ownership, and now, information technology.

Next up for his Hillwood development firm is the 70-acre Victory complex, a master-planned network of upscale hotels and apartments, plazas, offices, retailers and restaurants that Perot will fashion around the new arena with Tom Hicks' Southwest Sports Group and New York-based Palladium Co.

He scoffs at the notion of ever resting on his laurels and a growing fortune, saying he thrives on challenges and the bustle of both his avocation and vocation: business.

The transition from the wheeler-dealer world of development at the 15,000-acre AllianceTexas spread to the head post at tech-heavy Perot Systems of north Dallas might seem a daunting challenge. The Alliance Corridor, home to FedEx, Texas Motor Speedway, Fidelity Investment and dozens of Fortune 500 firms, is vast and diverse. Perot Systems, although international, is contained and office-bound.

"Sure, they are two different types of business, but they are still business," Perot says. "The fundamentals are the same. You still have to have a quality product. You still have to take care of your customer and take care of your associates. You still have to take care of your investors."

Perot has spent the brunt of 2001 overseas, primarily in London, expanding the international presence of the 8,000-employee Perot Systems, which markets business solutions and system integration worldwide.

But he remains involved in his real estate businesses as well.

This spring, Perot traveled to Las Vegas to attend the International Council of Shopping Centers annual convention, using his personal touch to sell potential tenants on the Victory development.

When Boeing Co. scoured North Texas while searching for a new headquarters, Perot took time to sell the virtues of Alliance.

On weekends when he is in town, Perot says, he's apt to fly his private helicopter over Alliance to keep tabs on development.

Mike Berry, president of Hillwood Properties, said Perot spends only 2 percent to 3 percent of his time on Hillwood matters and the balance on Perot Systems.

"But he manages to keep on top of everything important. I wish I had the internal organizational skills to manage all the information that comes at him and then to react the way he does," says Berry, who has worked with Perot for more than a decade.

Perot has had his detractors.

He came under fire in the mid-1990s after buying the Circle T Ranch and asking the city of Westlake to commit $100 million for infrastructure, resulting in a two-year legal battle that split the community. Some former business partners have complained that Perot uses war-room tactics that border on dirty pool.

Perot, who concedes that his firms have tough negotiators, has said his companies work hard to avoid litigation and to treat people fairly.

Mark Cuban, who purchased the Mavericks from Perot, called his negotiating style "straightforward and to the point. He didn't play any games at all, and most importantly was very fair in all of our dealings. I wish everyone I did business with lived by the same principles as Ross."

Familiar figure

On a recent Thursday, the familiar figure of a legendary entrepreneur and former presidential candidate strode purposefully across the Perot Systems lobby. He stepped quickly onto a main escalator, disappearing under a sign that says, "Every good and excellent thing stands moment by moment on the razor's edge of danger and must be fought for."

At 71, Ross Perot Sr. continues to thrive on business, remaining active in sales and marketing at the company he founded 13 years ago.

But it's his son who's in the trenches now.

The younger Perot, who has served on the board of Perot Systems since its founding, didn't blink when asked to take the reigns of the 8,000-employee firm in August 2000.

As a young man, he thought he would someday run his father's high-tech company after a stint as an Air Force fighter pilot. But it didn't happen quite as expected.

"I really thought I'd come back to work at EDS," Ross Perot Jr. says. "And then Dad sold the company [to General Motors], so that kind of ruined that idea."

In fact, there was no family business to return to.

"Things work out for a reason," Perot says. "Dad and I finally sat down and he said, 'Okay, what are we going to do and what businesses are we going to be in?' ... He said, 'Go figure out what to do with the [family's north Tarrant County] real estate,' and I said, 'OK.' "

His father went off to start Perot Systems. Ross Perot Jr.'s "OK" led to the 65-square-mile Alliance development.

Perot says that when he took over as CEO at Perot Systems, "I saw a very good business model with great products and great clients. But we needed more focus and discipline, so we significantly tightened the basic business. We had to prepare for this technology depression that historically is good for companies like ours."

Perot set up a global organization structure to help take the company's customer base worldwide, replacing the old system of different teams for each country.

His first week as CEO, he sent a companywide e-mail asking employees to send him their frank views about the firm.

"Now I have a dialogue with 8,000 people and all 8,000 have direct access to me," he says. "Fortunately, they're very blunt and they know whatever they tell me is confidential. That way, I get a sense of where we have strong leaders and weak leaders."

Many workers were frustrated, he says, "that we couldn't take advantage of our skill sets worldwide. If we had great products and skills in Europe, those ideas never came into North America or vice versa."

The end result:

"We de-layered ... to make the company leaner, make it faster and make it much more nimble," he says. Even with the restructuring, the company employs about 400 more than it did a year ago.

Michael Hutchison, a senior investment analyst at Barrington Research, said that since taking over, Perot has made management more accessible to employees as well as the financial community, "and has done a good job of controlling costs."

"People asked me about his ability to take over the role of his father," Hutchison says. "But it all goes back to leadership ability ... and he has it."

Now, Perot Systems "is the only stock in systems integration that I rate a strong buy," he adds. The company's stock price has moved up about 50 percent in the past year.

Rolling dice

From the air, the Alliance region seems to encompass more bulldozers and construction workers per square mile than does anywhere else in the state.

But while golf courses and subdivisions are being sculpted with fervor, the big commercial deals are slowing at Alliance and elsewhere, as industrial and office users retrench in the flat economy.

Perot concedes that commercial real estate has softened. But it's far from the dark days of the late 1980s, he said, when the federal government "played a hand in driving real estate values back to early 1960s value with that S&L disaster."

Texans are both optimistic and aggressive "and they like to roll big dice, so we're right in the middle of every boom and every bust," he said. "But this time, the markets are [more] stable."

Major manufacturing and office facilities targeted for the Alliance area by Intel and Dell Computer haven't materialized. Intel stopped construction on a chipmaking plant, citing an unfair state tax structure, and expanded elsewhere. Dell put off plans to expand to Fort Worth this spring when the computer market softened.

Although some in the development community doubt that the two high-tech giants will ever land here, Perot says he expects both companies to build.

"They've made their commitments. They have their land positions. Now, we have to ride the technology roller coaster and wait for the market to come back. I expect to see great facilities out of both."

Also still on hold is a runway expansion at the airport, which has been in the planning pipeline since the early 1990s.

"We have needed that additional couple thousand feet of runway for years," Perot says. "For us to attract the true international carrier and to make [the region] the true international port it wants to be, we need it. Certainly, Federal Express has a strong international footprint, and once we give them the ability to go non-stop to Asia, it'll be great for business."

In 1990, Perot said the original 9,600 acres at Alliance would be worth $1 billion by as early as 2010. Today, he won't say what it's worth, adding: "I was a kid shooting off my mouth 10 years ago."

But he says he's quite satisfied with the project. "We have 20 million square feet. It's become one of the great growth corridors in North America. When you do projects like this, you have to be able to maintain the long-term view."

Alliance added 3,000-plus jobs in 2000. In 2001, Alliance is likely to net about 2,000 new jobs, Perot estimates.

A couple of deals are brewing "that ought to add another couple thousand jobs, if we can get them done."

Although the scope of Alliance is sprawling, the 70 acres at the Victory development would yield little more than a warehouse site. But the downtown Dallas project brought a new level of complexity, Perot says.

Perot said his lead real estate attorney called Victory "by far the most complicated closing he's ever had, because the land had not been surveyed for 60 or 70 years," he says. "No one really knew who owned it."

Its two previous occupants, a rail yard and power plant, "kind of lived in their own world and I really think their local managers did their deals back and forth: 'I want to run a line here.' No problem. Or, 'I want to run a track here.' No problem.

"I don't think they spent much time documenting what they did. So we had to come in and untangle all that spaghetti."

Part of that challenge was a political street fight to persuade Dallas voters to spend tax dollars on the project; the election was won by 1,000 votes.

"We like to say we got our master's in real estate at Alliance, at Victory we're earning our doctorate," Perot says. "The truth is, we wouldn't have tackled Victory if we hadn't had Alliance under our belts."

Market quirks

Most of Perot's future projects are subject to the quirks of market conditions and the economy.

At Alliance's 2,315-acre Circle T Ranch property, a planned retail mecca has yet to surface. Mall developer General Growth still holds 128 acres at the Circle T for a 1.6 million-square-foot regional shopping center on the shores of Lake Turner. But work will not start until next year at the earliest, Hillwood officials said.

Circle T, on the east side of Alliance, is home to a Fidelity Investments regional campus, a DaimlerChrysler financial services facility and a soon-to-open golf course designed by Tom Fazio. It will soon launch a Pete Dye-designed course, complementing area links designed by Arnold Palmer, Greg Norman, Byron Nelson and Ben Hogan.

And Victory in downtown Dallas has yet to announce a tenant, although a boutique hotel, ESPNZone, House of Blues and many others are knocking at the door, says Perot, conceding that the market is less than exuberant at present.

"With the possible exception of Staples Center [in Los Angeles], which has 25 acres next to it, we will be the only pure developer around to really pull this type of [project] off."

Development of Victory, though reliant on market cycles, "is an inevitability," Perot says.

Dave Arnott, who teaches professional sports management at Dallas Baptist University, says Alliance and Victory - even though quite different - indicate a common investment pattern for Perot. "They first got government support for construction of their core project, and then Perot profits on the periphery," he says.

In recent years, Hillwood has expanded into another niche: redevelopment of closed Air Force bases, a venture Perot's group landed in part because of his aviation-based background. Base projects include the old Norton Air Force Base in California.

When the bases first started closing, cities thought they could re-use the existing models, which sometimes placed an industrial use uncomfortably close to base housing.

"But you can't do it now," Perot says. "Communities got gridlocked for four or five years trying to figure these puzzles out, and now they're coming to Hillwood."

Public/private partnerships, the lifeblood of Perot's regional dealings over the past decade and a half, are the key, he says. "You need private capital at risk and developers waking up every morning with their money on the line."

And back in north Dallas, Perot Systems will continue its international and domestic expansions.

The company recently signed a $600 million, 10-year deal with Catholic Healthcare West, a pact Perot characterizes as "huge and complicated. We're basically going to take 48 hospitals, 19 different data centers and ... rationalize these into one big data center."

Perot continues to spend the brunt of his time overseas and often takes his wife, Sarah, and other family members with him, he says.

"I'm a big proponent of globalization," says Perot. "I think the companies that do well today are companies have the global view and have the ability to take the customer worldwide, which we do. We've certainly made great strides but we still have a lot of things we're working on."

There's much more work ahead in all of Perot's ventures, he says.

"I'm a person who's never satisfied."

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QUOTE RAIL: Perot Jr. on the local office and industrial markets:

The telecom bust of 2000-2001 quickly destabilized the office space market, he said, "And all of a sudden, we have a huge void. There's far too much space. It could take a couple of years to fill."

"Industrial is also getting a little soft. [Developers] are putting, in my opinion, too much spec on the ground. So we're watching the market carefully."

"There are [some indications] that telecom bubble was larger than the S & L bubble. They've lost like $260 billion in telecom. That is the train wreck of this cycle."

On the Boeing decision:

"We were a little surprised they went to a pure urban Chicago location. It was just completely counter to the scope we thought they were looking at. (CEO) Phil Condit was trying to make sure that the headquarters is always the headquarters.

He left Seattle because all the operations grew up around the headquarters. He was shrewd enough to realize that if he had moved to North Texas with the headquarters, in 20 years, you could easily see all of Boeing growing up around them again ... You're sure not going to see aircraft factories in downtown Chicago."

On the breakup of Panattoni-Hillwood Co., a development partnership that focused on areas of the Metroplex outside of Alliance: "Carl Panattoni came in and wanted to learn the market, and we learned the market together. It got to where we [both] learned the market and it just made sense for us to go our separate ways and do our own deals. We're still partners in Nashville and in Raleigh."

Steve McLinden (817) 548-5522, mclinden@star-telegram.com